Change and growth are good, but can be risky. This week's newsletter reports on major tech and e-commerce companies going back to their roots in terms of mission and product offering.
I also share stories about Apple's incredible deposit milestone, Meta reversing course on e-commerce, and new ad types coming your way.
All this and more in this week's 120th Edition of Shopifreaks. Thanks for subscribing and sharing!
PS: I have a sad feeling that some of the e-mails to @shopify.com e-mail addresses who subscribe to my newsletter are going to bounce back this week. Condolences to everyone who was impacted by the layoffs.
Stat of the Week 📈
46% of Peruvians (15.6 million) made purchases online. E-commerce in Peru registered a 30% expansion in 2022, reaching $12B. – According to Peruvian Chamber of Electronic Commerce
Share this week's stat on Twitter & LinkedIn.
1. Shopify purges logistics & lays off 20% of Shopifolks
Big changes at Shopify this week:
1) Adios Deliverr – Shopify sold its logistics arm, including Deliverr which it acquired for $2.1B last May, to Flexport, a US-based supply chain management and logistics company, in an all stock deal.
Shopify now owns 13% of Flexport, which was most recently valued at around $8B, meaning that Shopify’s $2.1B acquisition is now worth a little more than $1B (not including the stake Shopify bought at Flexport’s Series E round 15 months ago).
As part of the deal, Flexport became Shopify's “preferred” logistics partner.
Dave Clark, the CEO of Flexport since March who formerly spent 23 years building Amazon's logistics network, said in response to a question about competing with Amazon that he “personally would rather think of ourselves as more of an extension of the Amazon network than a competitor to the Amazon network.”
2) Adios 6 River Systems – Shopify also sold 6 River Systems, the warehouse robot maker it acquired in 2019 for $450M, to Ocado, an autonomous mobile robot fulfillment provider based in Massachusetts. Terms of the deal were not disclosed.
Ocado said that the acquisition brings new IP and valuable commercial and R&D expertise in non-grocery retail to their organization.
3) Adios Shopifolks – And last but certainly not least in regards to impact, Shopify is laying off another 20% of its staff, or around 2,300 workers. Ten months ago they laid off around 1,000 employees. Condolences to everyone impacted by this round of layoffs.
Back to its roots
Shopify says it's going back to its roots of focusing on building software that helps merchants sell online. CEO Tobias Lütke wrote in a memo to employees, “Shopify finds it useful to talk about the difference between main quests and side quests internally. The main quest of the company is its mission, the reason for the company to exist. Side quests are everything else.” Logistics is a “side quest” that the company is ready to let go.
Techcrunch described the letter as, “a particularly egregious example of layoff communications done poorly, but it stands as an accurate representation of Lütke’s basic inability to empathize with the situation of many employees under his company’s charge.” Harsh!
President Harley Finkelstein said in a video message to employees Thursday morning, “I've never, ever, felt more sure about the future of this company and the team we have in place than I am today.”
Affected employees will receive a minimum of 16 weeks severance, medical benefits, access to Shopify's employee assistance program, and they get to keep the office furniture. Laptops will have to be returned, but the company will cover the cost of a personal replacement.
Investors are happy.
The stock jumped from around $46 at close the day before the announcement, to around $59 the following day, and now hovers around $63 at the time of writing this.
Shopify beat Wall Street estimates for Q1, reporting revenue of $1.51B (up 25% YoY), and posting earnings of $68M (or 5 cents per share).
Turns out it's not that sexy to be in the low-margin capital intensive logistics business, and much more attractive to be in the high-margin streamlined software and payments businesses.
And believe me, I get it. There's a reason why I own digital companies and operate with a very small team and very high margin. It's by design. Managing labor and having a large geographic footprint is not all it's cracked up to be in business. Best to focus on what you do best than try to be another everything store.
Although painful in the short term, I think it's a smart long term move for Shopify. What are your thoughts? Hit reply and let me know.
2. Wix Shipping + Shippo
While some e-commerce platforms are exiting logistics, others are entering the business. Last week Wix partnered with Shippo to launch its new native shipping solution, Wix Shipping.
The partnership gives Wix merchants access to Shippo's end-to-end shipping technology directly from the Wix Dashboard without the need to subscribe to a 3rd party shipping tool.
Wix merchants can now buy and print shipping and return labels, fulfill orders in the same dashboard they manage products and inventory, and access Shippo's negotiated discounted shipping rates.
Andreas Lieber, Shippo's COO, said, “With Wix Shipping powered by Shippo, we're able to make shipping faster, easier, and more affordable for their users. It's also a testament to the effectiveness of our Shipping Elements offering, which simplifies the process of connecting with e-commerce platforms and fulfilling our mission of building the shipping layer of the internet.”
Wix Shipping is available to users in the US, UK, Canada, and Germany with plans for more roll outs in the future.
Wix has been on fire recently differentiating itself through its partnerships and integrations:
- April 2023 – Wix and Square partnered to allow restaurant owners to sync their Wix Restaurants site with their Square account to streamline online ordering.
- April 2023 – Wix integrated with Amazon India to enable merchants in India to connect their Wix Store with Amazon, sync their inventory, and manage orders within a single dashboard.
- April 2023 – Wix expanded integrations with WhatsApp, Instagram, and Facebook Messenger where users can now connect their business accounts directly to their Wix Inbox.
- March 2023 – Wix partnered with Forter, a US-based trust platform for digital commerce, to increase approval frates for merchants while minimizing fraud.
- March 2023 – Wix partnered with Stripe to bring Tap to Pay on iPhone to US-based Wix merchants. The week before, they brought the feature to Android.
- Feb 2023 – Wix launched an AI Text Creator within the Wix Editor, allowing users to create anything from titles to full website copy.
- Dec 2022 – Hostme, a provider of restaurant management software, launched an integration with Wix to allow restaurant owners to integrate their automated restaurant reservation and waitlist management system.
- Nov 2022 – Wix became an official partner of React Native, an open source UI software framework originally developed by Facebook.
- Oct 2022 – Klaviyo integrated with Wix to provide users with their customer relationship tools.
- Sep 2022 – Wix integrated with Semrush to allow users to access their SEO keyword data directly through the dashboard, giving them insight that can help them improve their search ranking and identify which keywords to target.
- Sep 2022 – Wix partnered with Choice to bring ACH electronic funds transfer payments to U.S. based merchants.
- Aug 2022 – Wix launched an AI-powered editor that simplifies the design process for web developers.
- July 2022 – Wix re-launched its solution for the hotel industry, Wix Hotels, this time powered by HotelRunner.
As opposed to competing with Shopify with an expansive selection of apps and integrations, Wix has been selectively making deeper native integrations into their platform. The outcome is a powerful suite of tools for merchants.
3. BigCommerce Announces Strong Q1 2023 Financial Results (Sponsored)
BigCommerce announced strong Q1 2023 financial results last week, showing notable progress toward their two primary objectives for the year: growing their enterprise business and achieving profitability in Q4.
CEO Brent Bellm said, “We’re encouraged by our start to 2023. In a challenging macroeconomic environment, our team delivered enterprise ARR growth of 21% year-over-year and outperformed our guidance for operating loss improvement. We laid a strong foundation for reaching profitability on an adjusted EBITDA basis in the fourth quarter while executing our plan for continued customer, product and geographic growth.”
Highlights from the announcement include:
- Financial strength and stability.
- Total revenue was $71.M, up 9% compared to Q1 2022.
- Total annual revenue run-rate (ARR) as of March 31, 2023 was $316.7M, up 13% YoY
- Successful growth of enterprise business.
- ARR from enterprise accounts was $228.8M, up 21% YoY.
- ARR from enterprise accounts as a percent of total ARR was 72% as of March 31, 2023, compared to 67% as of March 31, 2022.
- Big brands such as Curology, Conn’s Home Plus, Diamonds Direct and Harley-Davidson launched on BigCommerce in Q1.
- Significant progress towards achieving goal of reaching adjusted EBITDA breakeven by Q4.
- Adjusted EBITDA was $5.5M, compared to $11.6M in Q1 2022. BigCommerce notes that adjusted EBITDA breakeven in Q4 is not a finish line, but a starting line in their business from which they will drive profitable growth for their shareholders.
- Strong international growth.
- The company continues to grow internationally with revenue in the Americas up 7% compared to the first quarter of 2022.
- Revenue in EMEA grew by 27%, and revenue in APAC grew by 1% compared to the first quarter of 2022.
More details can be found here.
4. Facebook & Instagram checkout
Facebook and Instagram will soon force their checkout experience on merchants who list their products within their internal Shops feature. In other words, customers will now be required to enter their payment info and complete checkout within the IG or FB apps, as opposed to being directed to the merchant's e-commerce website.
Beginning June 5th, 2023 new Shops to onboard via Commerce Manager and Shopify will only be able to offer checkout on FB and IG, and for all other onboarding partners by Aug 10th, 2023. However existing shops have until April 24th, 2024 before the checkout experience becomes required.
By Aug 10th, 2023, all businesses without checkout-enabled shops will no longer be able to use features associated with Shops including organic product tagging in posts and creating new custom/lookalike audiences derived from people who visited a Shop.
Businesses in the following markets will continue to be able to use FB and IG shops without checkout enabled until further notice: Australia, Brazil, Canada, Denmark, France, Germany, India, Indonesia, Italy, Japan, Mexico, Netherlands, Norway, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, U.K. and Ukraine.
With these changes, Meta is planning to upgrade its in-stream shopping tools with new features, which will see Shop ads integrated into its Advantage portfolio of automated ad solutions.
These moves are a reverse course in Meta's recent actions toward veering away from shopping on its platform:
- In January, IG removed the Shop tab from the main screen of the app.
- IG and FB have both scaled back its efforts to integrate live shopping.
- Last year Instagram shut down its affiliate commerce program.
I understand the need to bring conversion data back into the equation, but removing merchant choice is shortsighted.
Meta is so obsessed with controlling the entire e-commerce transaction that that they're subsequently making the e-commerce pool smaller on their platforms by offering an inferior product. IG and FB should instead make the pie bigger by letting merchants do what's best for their stores, and the ad revenue will flow. This should expand to creators / affiliates as well.
Rather than make the checkout REQUIRED on their platforms, Meta should make the experience so seamless and desirable that merchants WANT to enable it.
In other Facebook e-commerce news this week, the company is shutting down its Paid Online Event program, which let creators and brands earn revenue from organizing online events. The program was rolled out globally during the peak of COVID, and according to Meta, online paid events are now a thing of the past.
5. Apple hits $1B in deposits
Apple's newly launched high yield savings account, which offers a 4.15% annual return, brought in $990M in deposits over its first four days. On launch day alone, the savings account drew nearly $400M deposits.
By the end of launch week, roughly 240k accounts had been opened.
And that news was posted on May 1st. By now the deposits could be in the tens of billions!
The new savings account, which can be opened in less than one minute from a customer's iPhone, is only available to holders of Apple’s credit card, Apple Card. From there, Apple Card spend rewards, called daily cash, are automatically deposited into the high yield account.
For perspective, Apple Savings Account is offering more than 10x the national average of 0.37% on savings in bank accounts.
Shortly after Apple's savings account opened to the public, Robinhood increased their rate to 4.65% for Robinhood Gold members (which costs $5/month).
Other banks have also had to up the ante including:
- PNC – 4.30%
- Citizens – 4.50%
- Bask Bank – 4.75%
- Varo Bank – 5.00%
- Primis – 4.77%
- and many others (although some were offering a higher rate prior to Apple's Savings Account going public).
The major difference between Apple and those banks above? I'm not using a PNC phone!
Apple's 130+ million iPhone users in the U.S. and the ease of onboarding into an Apple Savings Account from your phone makes Apple a fierce contender in the banking world.
I'm already seeing a flurry of recommendations for Apple Savings accounts within FI groups in response to questions from members looking for higher-yield accounts.
Apple and other banks offering higher yield savings account is having a direct impact on larger banks:
- Charles Schwab said deposits fell 11%, or $41B, in Q1 and 30% YoY to $325.7B.
- State Street’s total deposits fell 5% in Q1 to $224B
- M&T Bank reported total deposits declined 3% from $163.5B at the end of 2022 to $159.1B.
It's great to bring some fresh competition and competitive rates into the world of banking. It's about time consumers got their fair share of returns for letting banks run wild with our money. We can enjoy it while it lasts, as I can't imagine rates like this will exist in a year from now.
If you see any more recent updates about total Apple Savings Account deposits, shoot me an e-mail and let me know. Who thinks Apple will break $50B in deposits by year end?
6. Online B2B sales are growing
Digital Commerce 360 released their 2023 Ecommerce in Manufacturing & Distribution Report, which offers a detailed study of the way online purchasing plays in these industries. Here are a few highlights from the report:
- US manufacturers and distributors grew total B2B sales in 2022 to $14.8B, up 15.4% YoY
- B2B digital commerce sales also grew by about 15% in 2022
- Caterpillar’s e-commerce parts sales now exceed $2B annually
- 63% of manufacturers plan on increasing their spending on digital technology in 2023
- Sales for Grainger’s Zoro.com e-commerce site surpassed $1B for the first time in a 12-month period, with 75% of orders in the U.S. originating from a digital channel
- 59% of manufacturers use EDI and digital marketing tools to generate more leads and sales
It's not all sunshine and roses in the world of B2B e-commerce though. New research from Merkle found that only 34% of buyers give their repeat business to a B2B brand they used in a previous purchase.
The report says that B2B buyers are “a finicky lot and not as loyal as before”, which means that B2B sellers have their work cut out building customer loyalty.
Merkle's research revealed that business buyers go to an average of 3.2 different sites looking for products and services to purchase for their organization, and may take up to 344 days to make a final purchasing decision.
Why aren't B2B buyers going straight to one source? It might have something to do with the fact that only 55% reported having positive brand experiences across their purchase journey, leaving much room and opportunity for improvement and loyalty building.
7. Airbnb rolls out 50+ features
Airbnb announced that it would roll out over 50 new features and upgrades to its platform. One feature called “Airbnb Rooms” aims to make it easier for travelers to stay with locals in their spare bedrooms as a more affordable way to travel — which is how Airbnb originally started.
CEO Brian Chesky said, “We're getting back to the idea that started it all. Airbnb Rooms are often more affordable than hotels, and they're the most authentic way to experience a city. This is the soul of Airbnb.”
Travelers who use Airbnb Rooms will have access to the “Host Passport”, which includes details that the hosts share about themselves.
Other changes and improvements include:
- Better / faster maps
- A redesign of guest wishlists
- Listings now include clearer and more transparent checkout instructions, which have been one of the biggest bone of contentions for travelers
- Partnership with Klarna to offer BNPL as a payment option to guests in US and Canada
- Tweaks to the fees guests pay for stays over three months
The new improvements can be used immediately.
8. Social's newest ad products
TikTok, Meta, Vevo, and Condé Nast announced new ad products and media planning tools on the final day of the Interactive Advertising Bureau's 2023 NewFronts.
- Bringing AR ads to Instagram Reels, Facebook Reels and Facebook Stories
- New way to pause a Reel ad for in-app reviews
- Ways for users to swipe through multiple product images within the same Reels ad
- Brands can now buy ads on specific publishers’ TikTok content
- Ads can now be bought on TikTok content tied to tentpole events
- New media planning tools and ad products
- An upcoming branded content studio that will offer advertisers the chance to pay to appear within live performances
- A music trivia Q&A ad product
- A new custom branded video offering
- New B2B service offering clients first-party insights and access to Condé Nast’s editors and creators
- A new global contributors’ network
You can checkout Digiday’s briefings on Day 1, Day 2, Day 3, and Day 4 of the NewFronts.
9. Other e-commerce news of interest
The FTC alleged that Meta violated its 2020 privacy order and is now proposing new protections for children and teens. Under the proposed restrictions, Meta's services would face limitations on the usage of data obtained from children and teenagers, only being able to use its data for providing services or ensuring security, while commercial exploitation would be prohibited.
Alibaba Group is exploring a U.S. IPO for its international online shopping unit, as part of its plan to split up the company into different businesses units. The company is in the early stages of the plan and has not yet determined the size of the offering, however they are currently in talks with banks to serve as its underwriters.
Squarespace launched a new guided website design system called Squarespace Blueprint that offers an upgraded set of styling options and a new layout for building a site. The service works by customers answering questions about the type of website they want to build, and then the tool combines multiple template elements together to create a tailor-made starting point for businesses.
E-commerce sales were down 8% in Canada YoY in Q1, worse than globally which collectively experienced a 2% decline. The report said that price is now the number one reason customers are switching brands and making purchasing decisions, which has impacted the average spend by customers.
eBay appointed Vidmay Naini as its general manager for global emerging markets, a role that covers the company's growth in SEA, India, Eastern Europe, Israel, the Middle East, Africa, and Latin America. Naini has been with the company for 18 years, where he previously led eBay's Southeast Asia and India businesses.
eGrowcery, a developer of a white-label e-commerce platform for the food industry, released a new option that allows retailers to own their e-commerce technology, as opposed to subscribe to it via a SaaS product. At the end of a mutually-defined period, the retailer has the option to migrate their e-commerce platform over to their own servers, where they can then control the product development moving forward.
Amazon introduced Fire TV Channels, a new, free, ad-supported streaming video experience. The channels will be integrated into various Fire TV interfaces including Home Screen rows, within Fire TV's Free Tab, and in category specific pages devoted to certain genres. Fire TV is also gaining new channels form NHL, Xbox, TMZ, and a new Travel category.
Amazon is also launching a new unit to distribute its movies and TV shows to other media outlets besides its own Prime Video. Some of Amazon's programming will soon be available to rent or buy on other streaming services, on airplanes, and on foreign TV networks.
Meesho laid off 251 employees, or around 15% of its workforce, to cut costs as part of its efforts to achieve profitability. All affected staff members will get one-month extra severance pay beyond the notice period and ESOPs irrespective of the period they have been with the company.
eBay recently told buyers to “get friendly with the seller” and “build that relationship” to discuss things like price or delivery options to arrive at a good deal — advice that's contrary to their previous stance. eBay has historically discouraged buyer-seller communication because it is fearful of people coordinating sales off its platform to avoid paying fees.
Equifax introduced an app for the Shopify marketplace called Kount Essentials, designed to address fraud challenges faced by merchants. Maybe I can use the $5.21 data breach settlement they sent me last year to cover the first eight minutes of the service.
Splitit and Visa partnered up to offer merchants a BNPL solution that can be embedded within the merchants' existing credit card process, allowing them to offer the installment service to their customers. The pilot product will be launched by Splitit and Visa during the second half of 2023 in select markets.
Amazon Labor Union's VP Derrick Palmer is facing criminal charges over allegations that he choked his girlfriend. Police bodycam video shows Palmer admitting to strangling his girlfriend, and if convicted, he could face jailtime and the possibility of being barred from serving as a union officer.
Salesforce added new generative AI and real-time data capabilities to its Sales Cloud, Service Cloud, and Data Cloud offerings via an enhanced version of Einstein, its AI assistant that launched earlier this year. New capabilities include Einstein Bots for Sales, which automates lead conversion and prequalifies web visitors, and Einstein Conversation Insights, which provides insights to sellers through conversational and transcription analysis.
10. Seed rounds, IPOs, & acquisitions
Nomba, a Nigeria-based fintech that offers payments and banking tools for business owners in the country, raised $30M in a pre-Series B round led by Base10 Partners, with participation from Shopify, bringing its total amount raised to $36.7M. The company will use the funds to develop tailored payment and operational solutions for specific industries like food companies, restaurants, logistics, and transport companies.
Secret Sales, a UK-based online value-focused fashion marketplace, raised €11.3M in a Series B round. The company will use the funds to improve its marketplace technology and accelerate its expansion into Europe with 12 new markets by 2025.
Slash, a US-based fintech that launched with a product that let users split recurring expenses, raised $19M in a Series A led by NEA, Menlo Ventures, and others. The company is working to pivot into offering a hybrid business / personal banking product that allows users to manage both sets of funds from a single dashboard.
Pando, an AI-powered supply chain startup that develops fulfillment management technologies, raised $30M in a Series B round led by Iron Pillar and Uncorrelated Ventures, bringing its total amount raised to $45M. The company aims to consolidate supply chain data across multiple silos including data on customers, suppliers, logistics service providers, facilities, and product SKUs.
The Commerce Co, a Singapore-based e-commerce solutions startup that currently offers two Shopify apps, raised $10M in a Series A round from Openspace Ventures and Jungle Ventures. Its first app, Addition, is a shipment app used by merchants in Australia, and its second app, Slide Cart, allows merchants to upsell and cross-sell items, offer rewards and coupons, and make announcements on their site.
Deep Instinct, a cyber threat prevention company that applies deep learning to cybersecurity, raised an undisclosed amount from PayPal Ventures. The funding will help accelerate the company's expansion, which currently protects customers across North America, Europe, and Asia.
Mozilla acquired Fakespot, a tool for spotting fake product reviews, for an undisclosed amount. Fakespot will not lose its Chrome, iOS, or Android versions, however moving forward Mozilla says there will be unique Firefox integrations.
Meta is looking to raise $8.5B in a five-part bond offering, its second issue after it raised $10B last year. The company said the bond issue's longest 40-year security could yield 192 basis points over Treasuries. Meta will use the funds to finance capital expenditures, repurchase outstanding shares of its common stock, and for acquisitions.
What'd I miss?
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See you next Monday,
Paul E. Drecksler
PS: I'm giving a reward to anyone who can spell drawer backwards.